On July 4, 2025, the One Big Beautiful Bill Act (OBBBA) was enacted, marking a sweeping reform of federal tax and transfer laws. While much of the media attention has focused on estate and gift tax changes, the OBBBA also introduced provisions directly affecting Achieving a Better Life Experience (ABLE) accounts, a vital planning tool for individuals with disabilities. For families in North Dakota, these updates may significantly change how ABLE accounts are established, funded, and utilized. To help families and caregivers navigate these new rules, an attorney at Thompson Law explains what ABLE accounts are, why they matter, and how the OBBBA reshapes them.
Understanding ABLE Accounts
An ABLE account is a tax-advantaged savings option specifically designed for people living with disabilities. Established under federal law in 2014, these accounts allow individuals and their families to save and invest money to cover disability-related expenses without jeopardizing access to public benefits such as Medicaid and Supplemental Security Income (SSI). One of the greatest benefits of an ABLE account is that funds used for approved Qualified Disability Expenses (QDEs) are not treated as countable resources when determining eligibility for government programs. As long as money is withdrawn and spent within the same month on qualifying expenses, SSI and Medicaid benefits remain intact.
Understanding Qualified Disability Expenses
The Internal Revenue Service (IRS) defines QDEs broadly, recognizing that the needs of disabled individuals vary widely. This expansive definition gives beneficiaries the flexibility to use ABLE funds in a way that fits their individual circumstances. These expenses, however, are all intended to improve health, independence, and quality of life and typically fall into the following categories:
- Education and Training: College tuition, vocational school fees, books, supplies, tutoring, or specialized learning tools.
- Health and Wellness: Doctor appointments, therapies, prescription medication, durable medical equipment, dental and vision services, or mental health treatment.
- Assistive Technology and Care: Communication devices, mobility aids, in-home caregivers, respite care, or personal assistance services.
- Employment Support: Job training programs, coaching, counseling, or adaptive equipment to assist with workplace participation.
- Legal and Financial Services: Attorney fees, disability-related representation, costs of preparing legal documents, and financial planning assistance.
- Housing and Daily Living: Rent or mortgage payments, property taxes, utilities, or home modifications needed for accessibility.
- Transportation: Payments for specialized transit services, public bus passes, or purchasing a wheelchair-accessible van.
OBBBA and Legislative Expansion
The OBBBA builds upon earlier federal reforms, including the ABLE Age Adjustment Act, to broaden the availability and usefulness of ABLE accounts. Together, these changes represent some of the most important updates to disability-related savings law since the passage of the Americans with Disabilities Act in 1990. For residents of North Dakota, these reforms make ABLE accounts more versatile and accessible, while also adding new financial benefits. Important changes to note as a result of the OBBBA include:
- Permanent Extension of ABLE-to-Work. Prior to the OBBBA, working beneficiaries with disabilities could make additional contributions to their ABLE account under the temporary ABLE-to-Work provision. This allowed contributions above the standard annual limit, but the rules were scheduled to expire. The OBBBA makes this option permanent. For 2025, the annual contribution limit for all sources combined is $19,000. Under ABLE-to-Work, a working beneficiary can contribute extra funds equal to their annual income or the federal poverty level, whichever is lower, provided they are not also contributing to an employer retirement plan. This change gives working individuals in North Dakota an ongoing opportunity to save more without jeopardizing benefits.
- Permanent 529 Rollover Flexibility. Families often begin saving for education with a 529 plan. If the intended student does not use all the funds, the account owner previously had limited options. With the OBBBA, tax-free rollovers from a 529 plan to an ABLE account are permanently allowed. This flexibility is especially useful for families in North Dakota who may have saved for education but later need to redirect those funds to disability-related expenses. It ensures that money set aside for one purpose does not go to waste but can instead support a disabled family member.
- Access to the Saver’s Credit. Another notable OBBBA change involves the Saver’s Credit, a federal tax incentive designed to encourage retirement savings among lower- and middle-income earners. Contributions to ABLE accounts are now eligible for this credit. Beginning in 2027, the Saver’s Credit becomes even more valuable, as the maximum contribution eligible for the credit will rise to $2,100, and the credit itself will increase to $1,050. This means families and individuals in North Dakota contributing to an ABLE account may benefit not only from tax-free growth but also from a direct reduction in their tax liability.
- Expanding Eligibility with the ABLE Age Adjustment Act. Perhaps the most transformative update is the expansion of eligibility criteria. Historically, only individuals whose disability began before age 26 were eligible to open an ABLE account. Effective January 1, 2026, the onset age threshold increases to 46. This change dramatically expands the pool of people who qualify. Adults who acquire disabilities later in life, through chronic illness, mental health disorders, or injuries sustained in adulthood, will now be eligible. For many in North Dakota, this adjustment provides a long-awaited opportunity to save in an ABLE account while maintaining critical benefits.
Why These Changes Matter for North Dakota Families
The OBBBA’s impact extends beyond technical tax adjustments. For families and individuals with disabilities, these changes mean greater flexibility, improved savings opportunities, and expanded eligibility. In a state like North Dakota, where rural communities often face limited access to disability services, the ability to save for transportation, technology, and medical needs without risking public benefits is invaluable. Parents of children with disabilities can now feel more confident that they can contribute long term, knowing that ABLE-to-Work and 529 rollovers will remain available. Adults who become disabled later in life will no longer be excluded from this valuable planning option.
Practical Considerations
While the OBBBA greatly enhances ABLE accounts, it remains critical to coordinate these accounts with other planning tools. For instance, a special needs trust may still be necessary to hold larger sums of money without affecting benefits. ABLE accounts are limited in how much can be contributed each year, and balances above certain thresholds can impact SSI eligibility. Families in North Dakota should also remember that ABLE accounts are state administered. Although the rules governing them are federal, each state, including North Dakota, operates its own program with specific enrollment procedures, investment options, and administrative fees. Consulting with a qualified attorney or financial advisor ensures that your family selects the right combination of planning tools.
The OBBBA demonstrates how quickly the legal landscape can change for disability planning. Failing to keep your estate plan updated could mean missing out on new opportunities or could put your assets at risk. Regularly reviewing your plan allows you to take advantage of enhanced savings options, expanded eligibility, and valuable tax credits that might significantly improve your loved one’s quality of life.
Do You Have Additional Questions about How the OBBBA Impacts an ABLE Account?
Please join us for an upcoming FREE seminar or webinar. If you have additional questions or concerns about how the OBBBA impacts your North Dakota ABLE account, contact a North Dakota and Minnesota estate planning attorney at Thompson Law by calling 605-362-9100 to schedule an appointment.
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